In a 4-3 decision on Thursday, the Pennsylvania Commonwealth Court ruled that portions of Act 13, the state's new omnibus Marcellus Shale law, were "unconstitutional, null and void" on the grounds that its limits on local zoning violate municipalities' right to substantive due process.
The majority also said Act 13 violated the constitutional right to clean air and water, and that it was also unconstitutional for the state Department of Environmental Protection (DEP) to have the power to grant waivers on setback restrictions.
Despite the ruling, the court said the rest of Act 13's provisions -- including the Marcellus Shale impact fee and environmental protections -- will remain in effect. Only the zoning portion of the law and the DEP's ability to waive setback requirements were struck down.
In a ruling written for the majority by Judge Dan Pellegrini, the court said it didn't buy the Commonwealth's argument that Act 13's zoning requirements would help the state optimally develop its oil and natural gas resources, protect the health and safety of its citizens and also the environment.
"If the Commonwealth-proffered reasons are sufficient, then the legislature could make similar findings requiring coal portals, tipples, washing plants, limestone and coal strip mines, steel mills, industrial chicken farms, rendering plants and fireworks plants in residential zones for a variety of police power reasons advancing those interests in their development," Pellegrini said. "It would allow the proverbial 'pig in the parlor instead of the barnyard.'"
Pellegrini said Act 13 violated the substantive due process of municipalities because it could require them to violate their comprehensive plans for growth and development. He also said the law violated the constitutional right to clean air and water because "it preempts a municipalities' obligation to plan for environmental concerns for oil and gas operations."
But the court rejected the municipalities' arguments that Act 13 was unfair because it allowed natural gas operators to use eminent domain and classified them differently from other industries.
"In this case, while Act 13 does treat the oil and gas industry differently from other extraction industries, it is constitutional because the distinction is based on real differences that justify varied classifications for zoning purposes," Pellegrini said.
Three judges, P. Kevin Brobson, Robert Simpson and Anne Covey, disagreed. In a dissenting opinion, Brobson said he agreed with the majority's findings on several facets on the case but differed on the due process issue.
"The problem with the majority's analysis is that this particular pig...can only operate in the parts of this Commonwealth where its slop can be found," Brobson said. "The natural resources of this Commonwealth exist where they are, without regard to any municipality's comprehensive plan.
"Oil and gas deposits can exist in a residential district just as easily as they might exist in an industrial district. What a local municipality allows, through its comprehensive plan, to be built above ground does not negate the existence and value of what lies beneath."
An appeal to the state Supreme Court is expected, but the ruling shocked industry supporters and raised fears that the entire law could be invalidated.
"The premise for the General Assembly's action earlier this year was to provide certainty and predictability that encourages investment and job creation across the Commonwealth," said Marcellus Shale Coalition (MSC) President Kathryn Klaber. "Lack of uniformity has long been an Achilles' heel for Pennsylvania and must be resolved if the Commonwealth is to remain a leader in responsible American natural gas development and reap the associated economic, environmental and national security benefits."
Lou D'Amico, president of the Pennsylvania Independent Oil and Gas Association (PIOGA), called the ruling "a serious setback."
"We need some predictability and uniformity in the rules and laws in Pennsylvania," D'Amico told NGI's Shale Daily on Thursday. "That's why the legislature passed Act 13; that's why the governor signed it, and that's why we supported it."
Asked if an appeal was imminent, D'Amico said, "I would think that if we didn't appeal it, the governor's office would. I think there is a good chance it will be appealed."
There was no immediate comment on the ruling from the offices of DEP Secretary Michael Krancer or Attorney General Linda Kelly. Both Krancer and Kelly were listed as defendants in the case, along with the state government and the Public Utility Commission.
The court ruled that most of the plaintiffs in the case -- Cecil, Mount Pleasant, Peters and Robinson townships in Washington County, South Fayette Township in Allegheny County, Nockamixon Township and Yardley Borough in Bucks County, and two council members -- have legal standing, but it said the Delaware Riverkeeper Network and a doctor from Monroeville, PA, do not (see Shale Daily, April 2).
Act 13, which Corbett signed into law in February, gave shale-rich counties in the state the ability to impose a 15-year impact fee on unconventional gas wells and made upgrades to environmental regulations (see Shale Daily, Feb. 15).
In April, Commonwealth Court Judge Keith Quigley granted a 120-day injunction on portions of Act 13 on the grounds that the plaintiffs needed more time to prepare their legal challenge and to amend local ordinances (see Shale Daily, April 12). Smith said the state had appealed Quigley's injunction to the Pennsylvania Supreme Court and was trying to have it overturned.
Seven parties were designated as amicus curiae in the case, meaning they are welcome to advise the court on its decision. Those parties are PIOGA, MSC, Chesapeake Appalachia LLC, MarkWest Liberty Midstream & Resources LLC, Penneco Oil Co. Inc., the state House Democratic Caucus and the Conservation Voters of Pennsylvania.
The case is Robinson Township et al v. Commonwealth et al (Docket No. 284-MD-2012).